The President Proposes, Congress Disposes. Does the Budget Still Work That Way?

There is an old saying in Washington that “The President proposes and Congress disposes.” The idea is that the Congress gets the last word on matters related to its constitutional authorities. That includes what is often referred to as the “power of the purse.” Bills to raise revenue have to originate in the House of Representatives, and both the House and Senate have to approve the annual budget and appropriate the money before it can be spent.

Whether that money gets spent is an issue that has been contested by the Executive and Legislative branches. President Richard M. Nixon impounded funds Congress had appropriated, leading to passage of the Congressional Budget and Impoundment Control Act of 1974. The Impoundment Control Act was intended to force the executive branch to obligate the funds appropriated by the Congress, the idea being that once appropriations are passed by the Congress and signed by the President, the President is required to spend the money. In the years since the Nixon impoundments and the passage of the Act, there has not been a significant test of the effectiveness of the Act.

The Impoundment Act provides for a mechanism for the President to request a recession of appropriations, by notifying the House and Senate of his intent via a “Special Message” which outlines, among other things, the amount to be rescinded, the reasons for doing so, the estimated economic and budget impact, and the effects on the programs that are affected.

The Act goes on to require that the funds be made available for obligation if the Congress does not pass a rescission bill within 45 days. It also provides for a course of action when the President fails to transmit a “special message” and simply does not obligate the funds. It puts the onus on the Comptroller General (the head of the Government Accountability Office) if the Comptroller General finds that the President, the Director of the Office of Management and Budget, an agency head or other officer of the government wants to defer spending appropriated funds. The Comptroller General is required to send a notice to both the House and Senate. It goes on to say that “If … budget authority is required to be made available for obligation and such budget authority is not made available for obligation, the Comptroller General is hereby expressly empowered, through attorneys of his own selection, to bring a civil action in the United States District Court for the District of Columbia to require such budget authority be made available for obligation.” It goes on to say that such a suit cannot be filed 25 days after the Comptroller General has notified the Congress of the deferred spending.

It is clear that the Impoundment Act is not an easy means of forcing an Administration to comply with the spending plans approved by the Congress, and the ease with which the Comptroller General might get the court to mandate that the executive branch spend money is untested.

That brings us to where we are today. The Congress did not pass final appropriations until six months into the fiscal year. Getting the money into the hands of agency managers who can start obligating the money took a few more weeks. Agencies were left with about 5 months to complete the process before most of the money turns into a pumpkin on September 30 when the fiscal year ends.

I am hearing from a number of agencies that spending is not moving rapidly. The combination of a complex and time-consuming procurement process and contracting offices that get almost an entire year worth of work dumped on them in the last half of the year makes it difficult to know if the Administration is slow-rolling obligations in agencies where it wanted cuts, or if it is just the normal run up to the end-of-year contract rush that we have seen for years.

If it is the former, and the Administration does not intend to obligate all of the money that was appropriated, there may be little the Congress can do about it. By the time it is apparent that they are doing it, Congress may not have time to follow the Impoundment Act process. If the Comptroller General made a determination in the next few weeks, say by August 1, either the House or Senate could refuse to go along with the cuts and the Administration would be obligated to spend the money. If they do not comply, the Comptroller General could go to court, but that may not do much good. By the time the court issues an order to obligate the money, there may not be enough time left in the fiscal year to do it.

At that point, it is likely that the only way the money would be obligated is if the Congress adds it into the 2019 budget and the President signs it. That is unlikely. It is also unlikely that the Congress would put such a large pot of money in play for a single year. It is also unlikely that the Congress will have appropriations in place for Fiscal 2019 in September (or October or November), so we may find ourselves in a position where de facto impoundments happen with little recourse to stop them. What that would do to the 2019 budget process is anybody’s guess, but I suspect it will poison the well for bipartisan agreement on the budget and may lead to requirements for far more reporting on progress in obligating funds throughout the year or some measure that ties nondefense spending to defense and homeland security more closely.

The bottom line on this is that the federal budget process is broken. Agencies are not getting appropriations until too late in the fiscal year. They operate under continuing resolutions that limit their ability to plan and to start new work or to hire new staff. Contractors are left not knowing if work will continue or terminate, and everyone in the contracting process (government and industry) crams most of the contracting process into six months of the year or less. The impact is significant. In a 2017 letter to Senator John McCain, Defense Secretary Mattis said “Long term CRs impact the readiness of our forces and their equipment at a time when security threats are extraordinarily high. The longer the CR, there greater the consequences for our force.”

The ongoing problems with the appropriations process and delayed obligations are not insignificant. Budget deals might be deals, or they might not. Agencies might have money, or they might not. Programs might exist, or they might not. None of that is good for government, industry, taxpayers or anyone else who relies on a stable and well-run federal government. While some might blame the Administration, others will argue that they are simply exercising executive power. Whatever the cause, the Legislative branch can far more effectively exercise its constitutional powers when it passes appropriations bills before the beginning of a fiscal year.



Another Approach for Refocusing OPM

Last week the Administration released its government reorganization plan, including a proposal that would substantially eliminate the Office of Personnel Management as an independent agency. In my post on the proposal, I suggested that it should not be dismissed out of hand. I also suggested that any reform of OPM be bipartisan. OPM’s role in the civil service is significant and whatever happens to it should be viewed as credible by the public and by the federal workforce.

Although I would not dismiss the Administration’s proposal, I believe there are other options for OPM that would be easier to implement, accomplish similar results, and gain more support from both sides of the aisle. Here are some of the issues regarding OPM that should be addressed, along with my recommendations.

Politicizing the Civil Service. One criticism of the Administration’s proposal is that it would politicize the civil service by putting civil service policy in the Executive Office of the President (EOP). I am not sure that is what would actually happen. Procurement policy is in EOP in the Office of Management and Budget, and we do not see widespread criticism that it has been politicized due to its location. In fact, during the Obama administration, some matters related to the Senior Executive Service were handled by the Office of Presidential Personnel. That move was also criticized by many as politicizing civil service matters, but there was no indication that was the result. I am not convinced that moving workforce policy to EOP would result in a politicized workforce. However, because we need civil service reform, and it must be credible, I believe the best solution is keep OPM as a significantly reformed independent agency.

Background Investigations. The background investigation program is the largest part of OPM. It generates and spends more than $1.4 billion annually and has more than half of OPM’s employees. background investigations are not the reason OPM exists, nor is it necessary to have them housed in the government’s HR agency. Moving the entire unit to the Department of Defense is a sound idea. The entire security clearance process should be revamped, and putting all of it in DOD makes it more likely that reform can happen. OPM does not have the organizational clout to drive that reform — DOD does.

Health and Life Insurance and Retirement. These programs are an integral part of any workforce strategy. They make up a significant portion of employee compensation. For those reasons, I believe the best approach is to keep them in OPM. Moving them to GSA separates them from the policy decisions, while finding another home for them in the Social Security Administration puts them in an agency where they are not aligned with the core mission. I agree with the Administration’s stated belief that alignment of missions and reduction or elimination of duplication is a good idea. In this case, the programs are not really related to anything in the other agencies.

Reimbursable Services. OPM provides a variety of other reimbursable services. Some, such as advertising jobs for agencies, are directly related to the core mission and have been part of OPM’s responsibilities since the Civil Service Commission was created. Others are of more recent origin and could be (and are) performed by any agency that offers administrative services. There is a legitimate argument that OPM is selling services where it makes policy and provides oversight, thereby constituting an organizational conflict of interest. I know many of the people involved in selling those services and know they would not deliberately try to use the policy and oversight functions to provide an advantage to their agency. In addition to the perceived conflict of interest, there is also another advantage that OPM and other federal agencies have over their private sector competition. They can sell services via an interagency agreement, where the private sector has to go through the contracting process. Interagency agreements are far less complicated and time-consuming, so federal agencies that sell services to other agencies have a big advantage. Rather than simply moving reimbursable services to GSA or another agency, I believe any such move should begin with a review of administrative services that agencies (not just OPM) sell to one another. We may find that there are good reasons for the practice for some services, but not for others. Once that review is complete and we know what businesses the government should be in, we would have a better idea how and where the remaining services should be handled.

Oversight. The Administration’s proposal does not adequately address how oversight of agency HR programs would be conducted. Agencies may not appreciate OPM’s oversight role, but a merit-based system requires some degree of oversight to ensure agencies are not running programs that violate merit system principles. It may be difficult for the White House to run that kind of oversight directly. I have heard comparisons of HR programs to procurement and, in some respects, that is a valid comparison. In addition to policies written by the Office of Federal Procurement Policy (located in OMB, which is in EOP), companies can protest contract awards via the Government Accountability Office. That protest process is a crucial component of the procurement process. Because there are millions of job applications filed every year, there is not a similar process that works effectively for the entire government. Agencies conduct limited oversight reviews of their own HR operations and OPM conducts reviews, either alone or in conjunction with agency oversight offices. The current process is better than nothing, but it is not great. OPM simply does not have the resources to conduct thorough reviews and it is unlikely to ever be given enough resources. That is one of several areas where the significantly expanded use of data that the Administration proposed could make a big difference.

Policy. The most crucial function of OPM is policymaking. OPM regulations and policies are the reason the agency exists. The Administration’s proposal accurately indicates there are shortcomings in policy development. When statutory changes generate a requirement for new policy, OPM can take as much as two to three years to get final rules in place. Competing effectively in today’s labor market requires a far more responsive capability. One reason for the weakness in policy development is the shortage of resources. OPM’s 2018 budget includes 192 FTE for the Employee Services unit where government wide hiring, SES, classification and pay policy are written. That means about 3% of the total FTE are devoted to policy in the areas that are most directly related to the government’s hiring and pay issues. With that level of resourcing it is surprising that policy development can get done at all.

Elevating the Status of OPM. The Administration’s proposal rightly intends to elevate the status of the workforce policymaking function. Another option for accomplishing that goal would be for President Trump to grant Cabinet status to the Director of OPM, as President Clinton did during his Administration. It is entirely up to the President and would require no action by Congress.

A reorganized OPM that does not have background investigations and has reduced volume of reimbursable services would be reduced from 6,375 FTE (based on the annualized 2018 Continuing Resolution) to about 2,500. If the overhead costs were thoroughly scrubbed, the agency could most likely identify more FTE that could be transferred from those functions to policy. If the agency identified better means of conducting oversight based on reviews of data rather than the traditional on-site audits of agencies, they could probably identify even more resources to put into policy and analysis.

I believe such an approach would gain more support in Congress than we will see for abolishing the agency. It could address many of the Administration’s concerns, while keeping the work in an independent agency and moving the more commercial services into the private sector.